Carbon Pricing in Organized Wholesale Electricity Markets, 66965-66969 [2020-23296]

Download as PDF khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices The Complainant certifies that copies of the complaint were served on the contacts listed for Respondent in the Commission’s list of Corporate Officials. Any person desiring to intervene or to protest this filing must file in accordance with Rules 211 and 214 of the Commission’s Rules of Practice and Procedure (18 CFR 385.211, 385.214). Protests will be considered by the Commission in determining the appropriate action to be taken, but will not serve to make protestants parties to the proceeding. Any person wishing to become a party must file a notice of intervention or motion to intervene, as appropriate. The Respondent’s answer and all interventions, or protests must be filed on or before the comment date. The Respondent’s answer, motions to intervene, and protests must be served on the Complainants. The Commission strongly encourages electronic filings of comments, protests and interventions in lieu of paper using the ‘‘eFiling’’ link at https:// www.ferc.gov. Persons unable to file electronically may mail similar pleadings to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426. Hand delivered submissions in docketed proceedings should be delivered to Health and Human Services, 12225 Wilkins Avenue, Rockville, Maryland 20852. In addition to publishing the full text of this document in the Federal Register, the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the internet through the Commission’s Home Page (https:// ferc.gov) using the ‘‘eLibrary’’ link. Enter the docket number excluding the last three digits in the docket number field to access the document. At this time, the Commission has suspended access to the Commission’s Public Reference Room, due to the proclamation declaring a National Emergency concerning the Novel Coronavirus Disease (COVID–19), issued by the President on March 13, 2020. For assistance, contact the Federal Energy Regulatory Commission at FERCOnlineSupport@ferc.gov, or call toll-free, (886) 208–3676 or TYY, (202) 502–8659. Comment Date: 5:00 p.m. Eastern Time on November 3, 2020. Dated: October 15, 2020. Kimberly D. Bose, Secretary. [FR Doc. 2020–23295 Filed 10–20–20; 8:45 am] BILLING CODE 6717–01–P VerDate Sep<11>2014 16:58 Oct 20, 2020 Jkt 253001 DEPARTMENT OF ENERGY Federal Energy Regulatory Commission [Docket No. ER21–110–000] Harts Mill TE Holdings LLC; Supplemental Notice That Initial Market-Based Rate Filing Includes Request for Blanket Section 204 Authorization This is a supplemental notice in the above-referenced Harts Mill TE Holdings LLC’s application for marketbased rate authority, with an accompanying rate tariff, noting that such application includes a request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability. Any person desiring to intervene or to protest should file with the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426, in accordance with Rules 211 and 214 of the Commission’s Rules of Practice and Procedure (18 CFR 385.211 and 385.214). Anyone filing a motion to intervene or protest must serve a copy of that document on the Applicant. Notice is hereby given that the deadline for filing protests with regard to the applicant’s request for blanket authorization, under 18 CFR part 34, of future issuances of securities and assumptions of liability, is November 4, 2020. The Commission encourages electronic submission of protests and interventions in lieu of paper, using the FERC Online links at https:// www.ferc.gov. To facilitate electronic service, persons with internet access who will eFile a document and/or be listed as a contact for an intervenor must create and validate an eRegistration account using the eRegistration link. Select the eFiling link to log on and submit the intervention or protests. Persons unable to file electronically may mail similar pleadings to the Federal Energy Regulatory Commission, 888 First Street NE, Washington, DC 20426. Hand delivered submissions in docketed proceedings should be delivered to Health and Human Services, 12225 Wilkins Avenue, Rockville, Maryland 20852. In addition to publishing the full text of this document in the Federal Register, the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the internet through the Commission’s Home Page (https:// ferc.gov) using the ‘‘eLibrary’’ link. Enter the docket number excluding the PO 00000 Frm 00040 Fmt 4703 Sfmt 4703 66965 last three digits in the docket number field to access the document. At this time, the Commission has suspended access to the Commission’s Public Reference Room, due to the proclamation declaring a National Emergency concerning the Novel Coronavirus Disease (COVID–19), issued by the President on March 13, 2020. For assistance, contact the Federal Energy Regulatory Commission at FERCOnlineSupport@ferc.gov or call toll-free, (886) 208–3676 or TYY, (202) 502–8659. Dated: October 15, 2020. Nathaniel J. Davis, Sr., Deputy Secretary. [FR Doc. 2020–23288 Filed 10–20–20; 8:45 am] BILLING CODE 6717–01–P DEPARTMENT OF ENERGY Federal Energy Regulatory Commission [Docket No. AD20–14–000] Carbon Pricing in Organized Wholesale Electricity Markets Federal Energy Regulatory Commission, Department of Energy. ACTION: Notice of proposed policy statement. AGENCY: The Commission is proposing to issue a policy statement to encourage efforts to incorporate a state-determined carbon price in organized wholesale electricity markets. DATES: Comments are due on or before November 16, 2020; reply comments are due on or before December 1, 2020. ADDRESSES: Comments, identified by docket number, may be filed electronically at https://www.ferc.gov in acceptable native applications and print-to-PDF, but not in scanned or picture format. For those unable to file electronically, comments may be filed by mail or hand-delivery to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street NE, Washington, DC 20426. The Comment Procedures Section of this document contains more detailed filing procedures. FOR FURTHER INFORMATION CONTACT: John Miller (Technical Information), Office of Energy Market Regulation, (202) 502–6016, john.miller@ferc.gov Anne Marie Hirschberger (Legal Information), Office of the General Counsel, (202) 502–8387, annemarie.hirschberger@ferc.gov SUPPLEMENTARY INFORMATION: On September 30, 2020, the Commission convened a technical conference on SUMMARY: E:\FR\FM\21OCN1.SGM 21OCN1 66966 Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices state-determined carbon pricing in organized wholesale electricity markets operated by regional transmission organizations (RTOs) and independent system operators (ISOs). As discussed further below, the record of that conference identified numerous potential benefits from incorporating a carbon price set by one or more states into RTO/ISO markets. We issue this proposed policy statement to clarify the Commission’s jurisdiction over RTO/ ISO market rules that incorporate a state-determined carbon price and to encourage RTO/ISO efforts to explore and consider the benefits of potential Federal Power Act (FPA) section 205 1 filings to establish such rules.2 I. Background on State EmissionsReduction Policies and CommissionJurisdictional RTO/ISO Markets 1. States are currently taking a leading role in efforts to address climate change by adopting policies to reduce their greenhouse gas (GHG) emissions. The electricity sector is a frequent focus of those policies. Several states have adopted laws or regulations that require the substantial or complete decarbonization of the electricity sector in the coming decades.3 Many others have adopted goals or targets to the same effect.4 2. Carbon pricing has emerged as an important, market-based tool in state efforts to reduce GHG emissions, including efforts to reduce GHG emissions from the electricity sector. In this proposed policy statement, we use the term ‘‘carbon pricing’’ to include both ‘‘price-based’’ methods adopted by states that directly establish a price on GHG emissions as well as ‘‘quantitybased’’ approaches adopted by states that do so indirectly through, for 1 16 U.S.C. 824d. proposed policy statement addresses only filings pursuant to FPA section 205 and not proceedings initiated pursuant to FPA section 206. 16 U.S.C. 824e. 3 E.g., Thirteen states—California, Hawaii, Maine, Maryland, Massachusetts, Nevada, New Jersey, New Mexico, New York, Oregon, Vermont, and Washington—and the District of Columbia have adopted clean energy or renewable portfolio standards of 50% or greater. See C2ES, U.S. State Electricity Portfolio Standards, https:// www.c2es.org/document/renewable-and-alternateenergy-portfolio-standards/. 4 E.g., Nineteen states—California, Colorado, Connecticut, Hawaii, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington—and the District of Columbia have adopted economy-wide decarbonization goals or targets of 50% or greater. See C2ES, U.S. State Greenhouse Gas Emissions Targets, https:// www.c2es.org/document/greenhouse-gas-emissionstargets/. khammond on DSKJM1Z7X2PROD with NOTICES 2 This VerDate Sep<11>2014 16:58 Oct 20, 2020 Jkt 253001 example, a cap-and-trade system.5 Currently, 11 states impose some version of carbon pricing,6 with multiple other states considering adopting a carbon pricing regime.7 Those programs include the ten-state Regional Greenhouse Gas Initiative (RGGI) 8 in the Northeast and the capand-trade program administered by the California Air Resources Board.9 In addition, numerous entities, including RTOs and ISOs, have begun examining approaches to incorporating a state5 ‘‘Price-based’’ methods, such as a carbon fee, use an explicit charge on each ton of GHG emitted. ‘‘Quantity-based’’ methods, such as a cap-and-trade system, limit the amount of permissible GHG emissions. Cap-and-trade systems establish a total quantity of GHGs that can be emitted collectively by all entities covered by the policy within a fixed period (a cap). ‘‘Allowances’’ are created for each ton of GHG emissions that can be emitted. Covered entities must obtain one allowance for each ton of GHG emitted. Covered entities obtain allowances from either: (1) initial allocation or auctioning of allowances; or (2) trading of allowances. Carbon prices thus emerge from the initial allocation of allowances and the trading of allowances on the secondary market. The term ‘‘state-determined carbon price’’ can refer to a carbon price set through either a single state or multi-state initiative (e.g., RGGI). 6 State carbon pricing programs that are currently implemented include: (1) California’s cap-and-trade program (see California Air Resources Board, Capand-Trade Program, https://ww2.arb.ca.gov/ourwork/programs/cap-and-trade-program/about); (2) Massachusetts’ cap-and-trade program (see Mass. Dept. of Env. Protection, Reducing GHG Emissions under Section 3(d) of the Global Warming Solutions Act, https://www.mass.gov/guides/reducing-ghgemissions-under-section-3d-of-the-global-warmingsolutions-act); and (3) the ten-state Regional Greenhouse Gas Initiative (RGGI), infra n. (see RGGI, Inc., Elements of RGGI, https://www.rggi.org/ program-overview-and-design/elements). See C2ES, U.S. State Carbon Pricing Policies, https:// www.c2es.org/document/us-state-carbon-pricingpolicies/. 7 Two states have pursued carbon pricing through rulemakings: Pennsylvania intends to join RGGI (see Penn. Dept. of Env. Protection, RGGI, https:// www.dep.pa.gov/Citizens/climate/Pages/ RGGI.aspx), while Washington adopted a statewide cap-and-trade program, although implementation is delayed due to litigation (see State of Washington, Dept. of Ecology, Clean Air Rule, https:// ecology.wa.gov/Air-Climate/Climate-change/ Greenhouse-gases/Reducing-greenhouse-gases/ Clean-Air-Rule). In 2019, 16 other states considered carbon pricing legislation: Connecticut, Hawaii, Maine, Maryland, Massachusetts, Minnesota, Montana, New Hampshire, New Mexico, New York, Oregon, Rhode Island, Texas, Utah, Vermont, and Washington (see National Conference of Energy Legislators, Carbon Pricing, State Information, https://www.ncel.net/carbon-pricing/#stateinfo). 8 Those states are: Connecticut; Delaware; Maine; Maryland; Massachusetts; New Hampshire; New Jersey; New York; Rhode Island; and Vermont. RGGI, Inc., https://www.rggi.org. Pursuant to state legislation enacted in April 2020 and a subsequent state rule, Virginia will join RGGI in 2021. See RGGI, Inc., RGGI States Welcome Virginia as its CO2 Regulation is Finalized, https://www.rggi.org/sites/ default/files/Uploads/Press-Releases/2020_07_08_ VA_Announcement_Release.pdf. 9 See California Air Resources Board, Cap-andTrade Program, https://ww2.arb.ca.gov/our-work/ programs/cap-and-trade-program. PO 00000 Frm 00041 Fmt 4703 Sfmt 4703 determined carbon price in wholesale electricity markets.10 3. As with any state regulation of electricity generation facilities, state efforts to reduce GHG emissions in the electricity sector may indirectly affect matters subject to Commission jurisdiction.11 And while the Commission is not an environmental regulator, under FPA section 205 12 the Commission may be called upon to review proposals that address the rules that incorporate a state-determined carbon price into RTO/ISO markets. 4. RTO/ISO markets already address various matters related to federal and state environmental regulations. For example, the Commission has long permitted generating resources to recover through wholesale rates the costs of complying with environmental regulations, including the costs of emissions pricing regimes.13 Permitting generating resources to recover through wholesale rates the costs associated with a state-determined carbon price in RTO/ISO markets is consistent with that precedent.14 10 For example, ISO–NE’s stakeholder discussions regarding carbon pricing (see van Welie Opening Comments at 2–3, Tr. 100:1–6 (van Welie); ISO–NE Pre-Technical Conference Statement at 6–7); NYISO’s carbon pricing draft proposal (see Dewey Opening Remarks at 3–5; Tr. 89:20–90:3 (Dewey); NYISO, Carbon Pricing, https://www.nyiso.com/ carbonpricing); and PJM’s Carbon Pricing Senior Task Force (see Giacomoni Comments at 2–3; Tr. 146:13–147:3 (Giacomoni); PJM, Carbon Pricing Senior Task Force, https://www.pjm.com/ committees-and-groups/task-forces/cpstf.aspx). 11 See, e.g., Coal. for Competitive Elec., Dynegy Inc. v. Zibelman, 906 F.3d 41, 57 (2d Cir. 2018), cert. denied sub nom. Elec. Power Supply Ass’n v. Rhodes, 139 S. Ct. 1547 (2019) (explaining that the state payments to address environmental externalities at issue in that case had ‘‘(at best) an incidental effect’’ on RTO/ISO markets); see also FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 776 (2016), as revised (Jan. 28, 2016) (EPSA) (noting that the federal and state spheres of jurisdiction under the FPA ‘‘are not hermetically sealed from each other’’). 12 16 U.S.C. 824d(a) (‘‘All rates and charges made, demanded, or received by any public utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges shall be just and reasonable.’’) (emphasis added). 13 See Policy Statement and Interim Rule Regarding Ratemaking Treatment of the Cost of Emissions Allowances in Coordination Rates, 59 FR 65,930, at 65,935 (1994) (Policy Statement on Costs of Emissions Allowances) (‘‘We will allow the recovery of incremental costs of emission allowances in coordination rates whenever the coordination rate also provides for recovery of other variable costs on an incremental basis.’’); see also Grand Council of Crees v. FERC, 198 F.3d 950, 957 (D.C. Cir. 2000) (holding that just and reasonable rates may account for a seller’s ‘‘need to meet environmental requirements,’’ which ‘‘may affect the firm’s costs’’); see generally Peskoe PreConference Filing at 1–2 (discussing these orders in greater detail); Konschnik Opening Statement at 1, Tr. 25:5–18 (Konschnik) (similar). 14 See Peskoe Pre-Conference Filing at 1 (‘‘The Commission has recognized that environmental E:\FR\FM\21OCN1.SGM 21OCN1 Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices 5. The Commission has also accepted filings to establish wholesale market rules that address how a statedetermined carbon price operates within markets that encompass more than one state. As one example, the California Air Resources Board (CARB) administers a multi-sector cap-and-trade program that includes the electricity sector.15 As part of its Energy Imbalance Market (EIM), the California Independent System Operator (CAISO) has proposed, and the Commission has accepted, tariff provisions to address how resources located outside California offer into the EIM in light of California’s carbon pricing regime.16 Those rules permit a resource to fashion its offers into the EIM such that they include a carbon price if they are dispatched to serve load in California and not include a carbon price if they are dispatched to serve load in the rest of the EIM.17 Similarly, CAISO has also proposed, and the Commission has accepted, measures for addressing resource shuffling in the EIM 18 by more accurately assessing which resources are dispatched to serve load in California.19 II. Discussion A. Incorporating a State-Determined Carbon Price in RTO/ISO Markets khammond on DSKJM1Z7X2PROD with NOTICES 6. In this section, we clarify that the Commission has the jurisdiction over RTO/ISO market rules that incorporate a state-determined carbon price in those markets. We also explain that it is the policy of this Commission to encourage efforts to incorporate a state-determined carbon price in RTO/ISO markets. compliance costs are appropriately included in wholesale rates, and there is no basis for the Commission to treat carbon price costs any differently.’’) (citing Policy Statement on Costs of Emissions Allowances, 59 FR 65,930 at 65,935). 15 See supra n.6. 16 Cal. Indep. Sys. Operator Corp., 153 FERC ¶ 61,087, at PP 9–11, 57 (2015). 17 Id. 18 In this context, CARB determined that CAISO’s initial method for accounting for emissions from EIM resources that serve California load incorrectly assumed that the least-emitting resources served California load, when instead some of those resources would have already been dispatched to serve load outside of California. Therefore, there was a ‘‘backfill’’ of higher-emitting resources to serve non-California load, or a ‘‘shuffling’’ of resources. CARB concluded that, but for California’s demand in the EIM, those higher-emitting resources would not have been dispatched at all and therefore those emissions should be attributed to serving California load. See, e.g., Wolak Comments at 2–3, Hogan Comments at 4–5, Tr. 101:16–24 (Wolak). 19 Cal. Indep. Sys. Operator Corp., 165 FERC ¶ 61,050, at PP 7, 17 (2018). VerDate Sep<11>2014 16:58 Oct 20, 2020 Jkt 253001 1. Commission Jurisdiction Regarding Rules That Incorporate a StateDetermined Carbon Price Into RTO/ISO Markets 7. We clarify that wholesale market rules that incorporate a state-determined carbon price in RTO/ISO markets can fall within the Commission’s jurisdiction as a practice affecting wholesale rates.20 Whether the rules proposed in any particular FPA section 205 filing do, in fact, fall under Commission jurisdiction is a determination we will make based on the facts and circumstances in any such proceeding. Accordingly, contrary to the suggestion in the Dissent, we are proposing a framework for applying our jurisdiction, not ‘‘pre-judging’’ particular matters or preemptively ‘‘dismiss[ing] . . . potential jurisdictional concerns.’’ 21 8. In EPSA, the Supreme Court articulated a two-part test for evaluating whether a Commission action is within its jurisdiction to regulate practices affecting wholesale rates. First, the activity being regulated must ‘‘directly affect’’ wholesale rates.22 Although the Court did not exhaustively define what it means to ‘‘directly affect’’ wholesale rates, it noted that the wholesale market rules established in Order No. 745 23 ‘‘meet that standard with room to spare.’’ 24 As the Court explained, those rules address how demand response resources participate in the RTO/ISO markets, including the levels at which they bid and are compensated.25 9. The wholesale market rules that incorporate a state-determined carbon price into RTO/ISO markets can satisfy that ‘‘directly affect’’ standard. Like the rules at issue in Order No. 745, the wholesale market rules that incorporate a state-determined carbon price could, depending on the particular circumstances, govern how resources participate in the RTO/ISO market, how market operators dispatch those resources, and how those resources are ultimately compensated.26 As such, 20 16 U.S.C. 824d(a) (‘‘All rates and charges made, demanded, or received by any public utility for or in connection with the transmission or sale of electric energy subject to the jurisdiction of the Commission, and all rules and regulations affecting or pertaining to such rates or charges shall be just and reasonable.’’) (emphasis added). 21 Dissent at P 5. 22 EPSA, 136 S. Ct. at 774 (citing Cal. Indep. Sys. Operator Corp. v. FERC, 372 F.3d 395, 403 (2004)). 23 Demand Response Compensation in Organized Wholesale Energy Markets, Order No. 745, 134 FERC ¶ 61,187, order on reh’g & clarification, Order No. 745–A, 137 FERC ¶ 61,215 (2011), reh’g denied, Order No. 745–B, 138 FERC ¶ 61,148 (2012). 24 EPSA, 136 S. Ct. at 774. 25 Id. at 774–75. 26 See, e.g., Tr. 23:3–22 (D. Hill); 28:24–29:8, 52:24–53:13 (Peskoe); D. Hill Comments at 5–7; PO 00000 Frm 00042 Fmt 4703 Sfmt 4703 66967 those wholesale market rules can affect wholesale rates in essentially the same way described in EPSA. 10. Second, EPSA explained that the Commission cannot regulate a matter that FPA section 201(b) reserves for exclusive state jurisdiction, ‘‘no matter how direct, or dramatic, its impact on wholesale rates.’’ 27 The Court explained, however, that the effects that wholesale market rules have on retail rates or other matters subject to exclusive state jurisdiction do not, in and of themselves, cause the Commission to exceed its jurisdiction.28 Instead, those effects are the inevitable result of the fact that the FPA divides jurisdiction over the electricity sector between the Commission and the states.29 In turning to the specifics of Order No. 745, the Court concluded that the rule did not regulate retail rates because ‘‘every aspect of [the rule] happens exclusively on the wholesale market and governs exclusively that market’s rules’’ and ‘‘the Commission’s justifications for regulating demand response are all about, and only about, improving the wholesale market.’’ 30 Under those circumstances, the Court explained, ‘‘section 201(b) imposes no bar’’ on Commission authority.31 11. The wholesale market rules that incorporate a state-determined carbon price in RTO/ISO markets can satisfy this standard as well. Wholesale market rules that incorporate a state-determined carbon price into RTO/ISO markets would not regulate a matter reserved exclusively to the states under the FPA, or otherwise displace state authority, including state authority over Peskoe Pre-Conference Filing at 2–3; Price Comments at 8–9; Rossi Pre-Conference Filing at 3. See generally Transmission Planning and Cost Allocation by Transmission Owning and Operating Public Utilities, Order No. 1000, 136 FERC ¶ 61,051, at PP 203–224 (2011), order on reh’g, Order No. 1000–A, 139 FERC ¶ 61,132, order on reh’g and clarification, Order No. 1000–B, 141 FERC ¶ 61,044 (2012), aff’d sub nom. S.C. Pub. Serv. Auth. v. FERC, 762 F.3d 41 (D.C. Cir. 2014) (requiring that regional transmission planning processes consider transmission needs driven by public policy requirements (which can include state public policies)). 27 EPSA, 136 S. Ct. at 775. 28 Id. at 776 (‘‘[A] FERC regulation does not run afoul of § 824(b)’s proscription just because it affects—even substantially—the quantity or terms of retail sales.’’). 29 Id. (‘‘It is a fact of economic life that the wholesale and retail markets in electricity, as in every other known product, are not hermetically sealed from each other. To the contrary, transactions that occur on the wholesale market have natural consequences at the retail level. And so too, of necessity, will FERC’s regulation of those wholesale matters.’’). 30 Id. 31 Id. E:\FR\FM\21OCN1.SGM 21OCN1 66968 Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices generation facilities.32 Instead, wholesale market rules that incorporate a state-determined carbon price in RTO/ ISO markets can ‘‘govern exclusively’’ the wholesale market and do so for the purpose of improving that market.33 If so, the wholesale market rules that incorporate a state-determined carbon price could affect matters within state jurisdiction, including a state’s regulation of generation facilities, without running afoul of section 201(b)’s limitation on Commission jurisdiction.34 Under that arrangement, and as in the CAISO EIM example discussed above,35 the state would retain authority over that carbon price as well as other measures for regulating generation facilities. For these reasons, incorporating a state-determined carbon price into RTO/ISO markets would not in any way diminish state authority. 12. Finally, we note that incorporating a state-determined carbon price into RTO/ISO markets could represent another example of the type of ‘‘program of cooperative federalism’’ that the Court noted with approval in EPSA.36 RTO/ISO market rules that incorporate a state-determined carbon price could, as discussed above, improve the efficiency and transparency of the organized wholesale markets by providing a market-based method to incorporate state efforts to reduce GHG emissions. Because the decision about the carbon price would be determined by the state—which could select a price of zero, should it choose—state authority would be unaffected, further removing any doubt that rules that incorporate such a state-determined carbon price would comply FPA section 201(b).37 addition, participants explained that carbon pricing is an example of an efficient market-based tool that incorporates state public policies into RTO/ISO markets, without in any way diminishing state authority.39 14. We agree that proposals to incorporate a state-determined carbon price in RTO/ISO markets could, if properly designed and implemented, significantly improve the efficiency of those markets.40 Accordingly, we propose to make it the policy of this Commission to encourage efforts by RTOs/ISOs and their stakeholders— including States, market participants, and consumers—to explore establishing wholesale market rules that incorporate state-determined carbon prices in RTO/ ISO markets. Although we will review any specific FPA section 205 filing based on the facts and circumstances presented in each proceeding, we encourage interested parties to explore approaches to propose wholesale market rules to incorporate a state-determined carbon price in RTO/ISO markets. khammond on DSKJM1Z7X2PROD with NOTICES B. Considerations for Evaluating an FPA Section 205 Proposal To Incorporate a State-Determined Carbon Price in RTO/ ISO Markets 15. The Commission will review any FPA section 205 filing that proposes to establish wholesale market rules that incorporate a state-determined carbon price in RTO/ISO markets based on the particular facts and circumstances presented in that proceeding. Nevertheless, certain questions and issues are likely to arise in any such filing. Below, we identify certain information and considerations that, based on the record at the Carbon Pricing Technical Conference, we 2. Commission Encouragement of Efforts believe may be germane to the To Incorporate a State-Determined Commission’s evaluation of a section Carbon Price Into RTO/ISO Markets 205 filing to determine whether an 13. As noted, on September 30, 2020, RTO/ISO’s market rules that incorporate the Commission held a technical a state-determined carbon price in RTO/ conference on the integration of stateISO markets are just, reasonable and not determined carbon pricing in RTO/ISO unduly discriminatory or preferential. markets. Participants at the conference The Commission seeks comment on identified a diverse range of potential benefits that could arise from such a (‘‘From a pure business perspective, clarity and certainty are so important. And for those of us that proposal. Those benefits include the are involved in making these long-term capitaldevelopment of technology-neutral, intensive investments in energy infrastructure, transparent price signals within RTO/ having this mechanism that can provide long-term ISO markets and providing market price signals for investment would be hugely 38 valuable.’’) (Beane), 264:17–19 (Crane), 278:8–10, certainty to support investment. In 32 See 16 U.S.C. 824(b). 33 EPSA, 136 S. Ct. at 776. 34 Id. 35 See supra P 6. 36 EPSA, 136 S. Ct. at 779–80. 37 Id. at 780. 38 See Tr. 24:1–3 (D. Hill), 85:17–21 (Bowring), 95:14–16 (Olson), 171:1–10 (White), 177:1–3 (Mukerji), 219:6–25 (Wadsworth), 261:24–262:5 VerDate Sep<11>2014 16:58 Oct 20, 2020 Jkt 253001 279:10–15 (Segal), 283:17–19 (Wiggins), 300:20– 301:12 (Beane), 312:22–313:15 (Beane), 314:14–22 (Crane), 317:11–20 (Segal), 326:17–327:7 (Wiggins). 39 See, e.g., Tr. 27:7–11, 29:9–24 (Peskoe), 31:15– 32:12 (Price), 85:9–21 (Bowring), 200:11–23 (Breidenich). 40 See, e.g., Tr. 31:15–25 (Price), 99:16–22 (van Welie), 150:6–23 (Mukerji), 169:5–12. (Hogan), 170:1–15 (Mukerji), 170:20–171:10 (White), 175:5– 20 (Rothleder), 219:1–221:4 (Wadsworth), 265:4–21 (Crane), 271:1–5 (T. Hill), 282:15–22 (Tierney). PO 00000 Frm 00043 Fmt 4703 Sfmt 4703 whether these are the appropriate information and considerations the Commission should take into account or whether different or additional considerations may be or must be taken into account. a. How, if at all, do the relevant market design considerations change depending on the manner in which the state or states determine the carbon price (e.g., price-based or quantity-based methods)? How will that price be updated? b. How does the FPA section 205 proposal ensure price transparency and enhance price formation? c. How will the carbon price or prices be reflected in LMP? d. How will the incorporation of the statedetermined carbon price into the RTO/ISO market affect dispatch? Will the statedetermined carbon price affect how the RTO/ ISO co-optimizes energy and ancillary services? Are any reforms to the cooptimization rules necessary in light of the state-determined carbon price? e. Does the proposal result in economic or environmental leakage? 41 How does the proposal address any such leakage? III. Comment Procedures 16. The Commission invites comments on this Proposed Policy Statement by November 16, 2020 and reply comments by December 1, 2020. Comments must refer to Docket No. AD20–14–000, and must include the commenter’s name, the organization they represent, if applicable, and their address in their comments. 17. The Commission encourages comments to be filed electronically via the eFiling link on the Commission’s website at https://www.ferc.gov. The Commission accepts most standard word processing formats. Documents created electronically using word processing software should be filed in native applications or print-to-PDF format and not in a scanned format. Commenters filing electronically do not need to make a paper filing. 18. Commenters that are not able to file comments electronically must send an original of their comments to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street NE, Washington, DC 20426. 19. All comments will be placed in the Commission’s public files and may be viewed, printed, or downloaded remotely as described in the Document Availability section below. Commenters on this proposal are not required to serve copies of their comments on other commenters. 41 See Hogan Comments at 4, Wolak Comments at 2, Singh Comments at 2–3. See also Tr. 56:12–57:10 (Price) (generally discussing economic and environmental leakage), Tr. 46:2–18 (Peskoe) (discussing the Commission’s jurisdiction over proposals from public utilities to address leakage). E:\FR\FM\21OCN1.SGM 21OCN1 66969 Federal Register / Vol. 85, No. 204 / Wednesday, October 21, 2020 / Notices IV. Document Availability khammond on DSKJM1Z7X2PROD with NOTICES 20. User assistance is available for eLibrary and the Commission’s website during normal business hours from the Commission’s Online Support at (202) 502–6652 (toll free at 1–866–208–3676) or email at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502–8371, TTY (202) 502–8659. Email the Public Reference Room at public.referenceroom@ferc.gov. 21. The Commission provides all interested persons an opportunity to view and/or print the contents of this document via the internet through the Commission’s Home Page (https:// www.ferc.gov). At this time, the Commission has suspended access to the Commission’s Public Reference Room, due to the proclamation declaring a National Emergency concerning the Novel Coronavirus Disease (COVID–19), issued by the President on March 13, 2020. 22. From the Commission’s Home Page on the internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field. 23. User assistance is available for eLibrary and the Commission’s website during normal business hours from the Commission’s Online Support at (202) 502–6652 (toll free at 1–866–208–3676) or email at ferconlinesupport@ferc.gov, or the Public Reference Room at (202) 502–8371, TTY (202) 502–8659. Email the Public Reference Room at public.referenceroom@ferc.gov. By direction of the Commission. Commissioner Danly is concurring in part and dissenting in part with a separate statement attached. Issued: October 15, 2020. Kimberly D. Bose, Secretary. United States of America Federal Energy Regulatory Commission Carbon Pricing in Organized Wholesale Electricity Markets Docket No. AD20–14–000 DANLY, Commissioner, concurring in part and dissenting in part: 1. The Commission issues a proposed policy statement today in this docket to ‘‘encourage’’ Regional Transmission Organizations (RTOs) and Independent System Operators (ISOs) to develop potential Federal Power Act section 205 1 filings proposing market rules to accommodate state-determined carbon pricing programs.2 I dissent in part because I believe that the issuance of a policy statement on this subject—a wholly discretionary act—is unnecessary and unwise. I concur with that part of the policy statement noting that we have jurisdiction to entertain section 205 filings that seek to accommodate state carbon-pricing policies, which is a fundamental principle that cannot be doubted. 2. As to my concern that the Commission should not exercise its discretion to issue a policy statement, I expressed similar concerns in my recent dissent to Order No. 2222 requiring RTOs/ISOs to promulgate rules to accommodate distributed energy resource aggregators.3 There I questioned the Commission’s seizure of authority at the expense of the States and advocated that ‘‘[w]e should allow the RTOs and ISOs . . . to develop their own DER programs in the first instance.’’ 4 ‘‘[T]hen the question of the Commission’s jurisdiction will be ripe.’’ 5 3. This policy statement does not mandate that RTOs/ISOs adopt carbonpricing accommodation regimes. I agree that the Commission should not issue such a mandate. 4. Instead, the policy statement ‘‘encourages’’ RTO/ISO rule changes. Without seeing a proposal, the Commission predetermines that any such proposal will be within the Commission’s jurisdiction and ‘‘would not in any way diminish state authority.’’ 6 That may well turn out to be true, but I would have waited until we had an actual 205 filing before us rather than pre-judging the issue based on unstated assumptions about how such programs might work. It is easy to imagine any number of RTO/ISO carbon-pricing proposals that would violate the Federal Power Act by impermissibly invading the authorities reserved to the States. This policy statement is not, as the majority’s order characterizes it ‘‘another example of the type of ‘program of cooperative federalism’ that the Court noted with approval in EPSA.’’ 7 There is no program. This is instead a non-binding, blanket dismissal of potential jurisdictional concerns. 5. As to the substance of the policy statement, I concur. I cannot do otherwise. The policy statement amounts to little more than a statement of fact: Section 205 of the Federal Power Act has not been repealed and the Commission therefore has jurisdiction to entertain section 205 filings that seek to accommodate state carbon-pricing policies. Surely, that need not be stated. And to the extent the Commission feels the need to ‘‘clarify’’ the fact that we have the power to accept just and reasonable tariff revisions that are designed to include mandatory state charges in energy and capacity market offers, I am hard-pressed to identify a more settled area of Commission law. For these reasons, I respectfully concur in part and dissent in part. James P. Danly, Commissioner. [FR Doc. 2020–23296 Filed 10–20–20; 8:45 am] BILLING CODE 6717–01–P DEPARTMENT OF ENERGY Federal Energy Regulatory Commission Notice of Effectiveness of Exempt Wholesale Generator and Foreign Utility Company Status Sanford Airport Solar, LLC ........................................................................................................................................................ Sugar Creek Wind One LLC ....................................................................................................................................................... Reloj del Sol Wind Farm LLC ................................................................................................................................................... Wildcat Creek Wind Farm LLC ................................................................................................................................................. Copper Mountain Solar 5, LLC .................................................................................................................................................. Battle Mountain SP, LLC ........................................................................................................................................................... 1 16 U.S.C. 824d (2018). Pricing in Organized Wholesale Elec. Mkts., 172 FERC ¶ 61,062 (2020). 3 See Participation of Distributed Energy Res. Aggregations in Mkts. Operated by Reg’l 2 Carbon VerDate Sep<11>2014 16:58 Oct 20, 2020 Jkt 253001 Transmission Orgs. & Indep. Sys. Operators, 172 FERC ¶ 61,247 (2020) (Danly, Comm’r, dissenting). 4 Id. (Danly, Comm’r, dissenting at P 4). 5 Id. PO 00000 Frm 00044 Fmt 4703 Sfmt 4703 EG20–205–000 EG20–207–000 EG20–208–000 EG20–209–000 EG20–210–000 EG20–211–000 6 Carbon Pricing in Organized Wholesale Elec. Mkts., 172 FERC ¶ 61,062 at P 12. 7 Id. P 13 (quoting FERC v. Elec. Power Supply Ass’n, 136 S. Ct. 760, 779–80 (2016)). E:\FR\FM\21OCN1.SGM 21OCN1

Agencies

[Federal Register Volume 85, Number 204 (Wednesday, October 21, 2020)]
[Notices]
[Pages 66965-66969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-23296]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. AD20-14-000]


Carbon Pricing in Organized Wholesale Electricity Markets

AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Notice of proposed policy statement.

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SUMMARY: The Commission is proposing to issue a policy statement to 
encourage efforts to incorporate a state-determined carbon price in 
organized wholesale electricity markets.

DATES: Comments are due on or before November 16, 2020; reply comments 
are due on or before December 1, 2020.

ADDRESSES: Comments, identified by docket number, may be filed 
electronically at https://www.ferc.gov in acceptable native applications 
and print-to-PDF, but not in scanned or picture format. For those 
unable to file electronically, comments may be filed by mail or hand-
delivery to: Federal Energy Regulatory Commission, Secretary of the 
Commission, 888 First Street NE, Washington, DC 20426. The Comment 
Procedures Section of this document contains more detailed filing 
procedures.

FOR FURTHER INFORMATION CONTACT: 
John Miller (Technical Information), Office of Energy Market 
Regulation, (202) 502-6016, [email protected]
Anne Marie Hirschberger (Legal Information), Office of the General 
Counsel, (202) 502-8387, [email protected]

SUPPLEMENTARY INFORMATION: On September 30, 2020, the Commission 
convened a technical conference on

[[Page 66966]]

state-determined carbon pricing in organized wholesale electricity 
markets operated by regional transmission organizations (RTOs) and 
independent system operators (ISOs). As discussed further below, the 
record of that conference identified numerous potential benefits from 
incorporating a carbon price set by one or more states into RTO/ISO 
markets. We issue this proposed policy statement to clarify the 
Commission's jurisdiction over RTO/ISO market rules that incorporate a 
state-determined carbon price and to encourage RTO/ISO efforts to 
explore and consider the benefits of potential Federal Power Act (FPA) 
section 205 \1\ filings to establish such rules.\2\
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    \1\ 16 U.S.C. 824d.
    \2\ This proposed policy statement addresses only filings 
pursuant to FPA section 205 and not proceedings initiated pursuant 
to FPA section 206. 16 U.S.C. 824e.
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I. Background on State Emissions-Reduction Policies and Commission-
Jurisdictional RTO/ISO Markets

    1. States are currently taking a leading role in efforts to address 
climate change by adopting policies to reduce their greenhouse gas 
(GHG) emissions. The electricity sector is a frequent focus of those 
policies. Several states have adopted laws or regulations that require 
the substantial or complete decarbonization of the electricity sector 
in the coming decades.\3\ Many others have adopted goals or targets to 
the same effect.\4\
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    \3\ E.g., Thirteen states--California, Hawaii, Maine, Maryland, 
Massachusetts, Nevada, New Jersey, New Mexico, New York, Oregon, 
Vermont, and Washington--and the District of Columbia have adopted 
clean energy or renewable portfolio standards of 50% or greater. See 
C2ES, U.S. State Electricity Portfolio Standards, https://www.c2es.org/document/renewable-and-alternate-energy-portfolio-standards/.
    \4\ E.g., Nineteen states--California, Colorado, Connecticut, 
Hawaii, Louisiana, Maine, Massachusetts, Michigan, Minnesota, 
Montana, Nevada, New Hampshire, New Jersey, New York, Oregon, 
Pennsylvania, Rhode Island, Vermont, and Washington--and the 
District of Columbia have adopted economy-wide decarbonization goals 
or targets of 50% or greater. See C2ES, U.S. State Greenhouse Gas 
Emissions Targets, https://www.c2es.org/document/greenhouse-gas-emissions-targets/.
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    2. Carbon pricing has emerged as an important, market-based tool in 
state efforts to reduce GHG emissions, including efforts to reduce GHG 
emissions from the electricity sector. In this proposed policy 
statement, we use the term ``carbon pricing'' to include both ``price-
based'' methods adopted by states that directly establish a price on 
GHG emissions as well as ``quantity-based'' approaches adopted by 
states that do so indirectly through, for example, a cap-and-trade 
system.\5\ Currently, 11 states impose some version of carbon 
pricing,\6\ with multiple other states considering adopting a carbon 
pricing regime.\7\ Those programs include the ten-state Regional 
Greenhouse Gas Initiative (RGGI) \8\ in the Northeast and the cap-and-
trade program administered by the California Air Resources Board.\9\ In 
addition, numerous entities, including RTOs and ISOs, have begun 
examining approaches to incorporating a state-determined carbon price 
in wholesale electricity markets.\10\
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    \5\ ``Price-based'' methods, such as a carbon fee, use an 
explicit charge on each ton of GHG emitted. ``Quantity-based'' 
methods, such as a cap-and-trade system, limit the amount of 
permissible GHG emissions. Cap-and-trade systems establish a total 
quantity of GHGs that can be emitted collectively by all entities 
covered by the policy within a fixed period (a cap). ``Allowances'' 
are created for each ton of GHG emissions that can be emitted. 
Covered entities must obtain one allowance for each ton of GHG 
emitted. Covered entities obtain allowances from either: (1) initial 
allocation or auctioning of allowances; or (2) trading of 
allowances. Carbon prices thus emerge from the initial allocation of 
allowances and the trading of allowances on the secondary market. 
The term ``state-determined carbon price'' can refer to a carbon 
price set through either a single state or multi-state initiative 
(e.g., RGGI).
    \6\ State carbon pricing programs that are currently implemented 
include: (1) California's cap-and-trade program (see California Air 
Resources Board, Cap-and-Trade Program, https://ww2.arb.ca.gov/our-work/programs/cap-and-trade-program/about); (2) Massachusetts' cap-
and-trade program (see Mass. Dept. of Env. Protection, Reducing GHG 
Emissions under Section 3(d) of the Global Warming Solutions Act, 
https://www.mass.gov/guides/reducing-ghg-emissions-under-section-3d-of-the-global-warming-solutions-act); and (3) the ten-state Regional 
Greenhouse Gas Initiative (RGGI), infra n. (see RGGI, Inc., Elements 
of RGGI, https://www.rggi.org/program-overview-and-design/elements). 
See C2ES, U.S. State Carbon Pricing Policies, https://www.c2es.org/document/us-state-carbon-pricing-policies/.
    \7\ Two states have pursued carbon pricing through rulemakings: 
Pennsylvania intends to join RGGI (see Penn. Dept. of Env. 
Protection, RGGI, https://www.dep.pa.gov/Citizens/climate/Pages/RGGI.aspx), while Washington adopted a statewide cap-and-trade 
program, although implementation is delayed due to litigation (see 
State of Washington, Dept. of Ecology, Clean Air Rule, https://ecology.wa.gov/Air-Climate/Climate-change/Greenhouse-gases/Reducing-greenhouse-gases/Clean-Air-Rule). In 2019, 16 other states 
considered carbon pricing legislation: Connecticut, Hawaii, Maine, 
Maryland, Massachusetts, Minnesota, Montana, New Hampshire, New 
Mexico, New York, Oregon, Rhode Island, Texas, Utah, Vermont, and 
Washington (see National Conference of Energy Legislators, Carbon 
Pricing, State Information, https://www.ncel.net/carbon-pricing/#stateinfo).
    \8\ Those states are: Connecticut; Delaware; Maine; Maryland; 
Massachusetts; New Hampshire; New Jersey; New York; Rhode Island; 
and Vermont. RGGI, Inc., https://www.rggi.org. Pursuant to state 
legislation enacted in April 2020 and a subsequent state rule, 
Virginia will join RGGI in 2021. See RGGI, Inc., RGGI States Welcome 
Virginia as its CO2 Regulation is Finalized, https://www.rggi.org/sites/default/files/Uploads/Press-Releases/2020_07_08_VA_Announcement_Release.pdf.
    \9\ See California Air Resources Board, Cap-and-Trade Program, 
https://ww2.arb.ca.gov/our-work/programs/cap-and-trade-program.
    \10\ For example, ISO-NE's stakeholder discussions regarding 
carbon pricing (see van Welie Opening Comments at 2-3, Tr. 100:1-6 
(van Welie); ISO-NE Pre-Technical Conference Statement at 6-7); 
NYISO's carbon pricing draft proposal (see Dewey Opening Remarks at 
3-5; Tr. 89:20-90:3 (Dewey); NYISO, Carbon Pricing, https://www.nyiso.com/carbonpricing); and PJM's Carbon Pricing Senior Task 
Force (see Giacomoni Comments at 2-3; Tr. 146:13-147:3 (Giacomoni); 
PJM, Carbon Pricing Senior Task Force, https://www.pjm.com/committees-and-groups/task-forces/cpstf.aspx).
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    3. As with any state regulation of electricity generation 
facilities, state efforts to reduce GHG emissions in the electricity 
sector may indirectly affect matters subject to Commission 
jurisdiction.\11\ And while the Commission is not an environmental 
regulator, under FPA section 205 \12\ the Commission may be called upon 
to review proposals that address the rules that incorporate a state-
determined carbon price into RTO/ISO markets.
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    \11\ See, e.g., Coal. for Competitive Elec., Dynegy Inc. v. 
Zibelman, 906 F.3d 41, 57 (2d Cir. 2018), cert. denied sub nom. 
Elec. Power Supply Ass'n v. Rhodes, 139 S. Ct. 1547 (2019) 
(explaining that the state payments to address environmental 
externalities at issue in that case had ``(at best) an incidental 
effect'' on RTO/ISO markets); see also FERC v. Elec. Power Supply 
Ass'n, 136 S. Ct. 760, 776 (2016), as revised (Jan. 28, 2016) (EPSA) 
(noting that the federal and state spheres of jurisdiction under the 
FPA ``are not hermetically sealed from each other'').
    \12\ 16 U.S.C. 824d(a) (``All rates and charges made, demanded, 
or received by any public utility for or in connection with the 
transmission or sale of electric energy subject to the jurisdiction 
of the Commission, and all rules and regulations affecting or 
pertaining to such rates or charges shall be just and reasonable.'') 
(emphasis added).
---------------------------------------------------------------------------

    4. RTO/ISO markets already address various matters related to 
federal and state environmental regulations. For example, the 
Commission has long permitted generating resources to recover through 
wholesale rates the costs of complying with environmental regulations, 
including the costs of emissions pricing regimes.\13\ Permitting 
generating resources to recover through wholesale rates the costs 
associated with a state-determined carbon price in RTO/ISO markets is 
consistent with that precedent.\14\
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    \13\ See Policy Statement and Interim Rule Regarding Ratemaking 
Treatment of the Cost of Emissions Allowances in Coordination Rates, 
59 FR 65,930, at 65,935 (1994) (Policy Statement on Costs of 
Emissions Allowances) (``We will allow the recovery of incremental 
costs of emission allowances in coordination rates whenever the 
coordination rate also provides for recovery of other variable costs 
on an incremental basis.''); see also Grand Council of Crees v. 
FERC, 198 F.3d 950, 957 (D.C. Cir. 2000) (holding that just and 
reasonable rates may account for a seller's ``need to meet 
environmental requirements,'' which ``may affect the firm's 
costs''); see generally Peskoe Pre-Conference Filing at 1-2 
(discussing these orders in greater detail); Konschnik Opening 
Statement at 1, Tr. 25:5-18 (Konschnik) (similar).
    \14\ See Peskoe Pre-Conference Filing at 1 (``The Commission has 
recognized that environmental compliance costs are appropriately 
included in wholesale rates, and there is no basis for the 
Commission to treat carbon price costs any differently.'') (citing 
Policy Statement on Costs of Emissions Allowances, 59 FR 65,930 at 
65,935).

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[[Page 66967]]

    5. The Commission has also accepted filings to establish wholesale 
market rules that address how a state-determined carbon price operates 
within markets that encompass more than one state. As one example, the 
California Air Resources Board (CARB) administers a multi-sector cap-
and-trade program that includes the electricity sector.\15\ As part of 
its Energy Imbalance Market (EIM), the California Independent System 
Operator (CAISO) has proposed, and the Commission has accepted, tariff 
provisions to address how resources located outside California offer 
into the EIM in light of California's carbon pricing regime.\16\ Those 
rules permit a resource to fashion its offers into the EIM such that 
they include a carbon price if they are dispatched to serve load in 
California and not include a carbon price if they are dispatched to 
serve load in the rest of the EIM.\17\ Similarly, CAISO has also 
proposed, and the Commission has accepted, measures for addressing 
resource shuffling in the EIM \18\ by more accurately assessing which 
resources are dispatched to serve load in California.\19\
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    \15\ See supra n.6.
    \16\ Cal. Indep. Sys. Operator Corp., 153 FERC ] 61,087, at PP 
9-11, 57 (2015).
    \17\ Id.
    \18\ In this context, CARB determined that CAISO's initial 
method for accounting for emissions from EIM resources that serve 
California load incorrectly assumed that the least-emitting 
resources served California load, when instead some of those 
resources would have already been dispatched to serve load outside 
of California. Therefore, there was a ``backfill'' of higher-
emitting resources to serve non-California load, or a ``shuffling'' 
of resources. CARB concluded that, but for California's demand in 
the EIM, those higher-emitting resources would not have been 
dispatched at all and therefore those emissions should be attributed 
to serving California load. See, e.g., Wolak Comments at 2-3, Hogan 
Comments at 4-5, Tr. 101:16-24 (Wolak).
    \19\ Cal. Indep. Sys. Operator Corp., 165 FERC ] 61,050, at PP 
7, 17 (2018).
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II. Discussion

A. Incorporating a State-Determined Carbon Price in RTO/ISO Markets

    6. In this section, we clarify that the Commission has the 
jurisdiction over RTO/ISO market rules that incorporate a state-
determined carbon price in those markets. We also explain that it is 
the policy of this Commission to encourage efforts to incorporate a 
state-determined carbon price in RTO/ISO markets.
1. Commission Jurisdiction Regarding Rules That Incorporate a State-
Determined Carbon Price Into RTO/ISO Markets
    7. We clarify that wholesale market rules that incorporate a state-
determined carbon price in RTO/ISO markets can fall within the 
Commission's jurisdiction as a practice affecting wholesale rates.\20\ 
Whether the rules proposed in any particular FPA section 205 filing do, 
in fact, fall under Commission jurisdiction is a determination we will 
make based on the facts and circumstances in any such proceeding. 
Accordingly, contrary to the suggestion in the Dissent, we are 
proposing a framework for applying our jurisdiction, not ``pre-
judging'' particular matters or preemptively ``dismiss[ing] . . . 
potential jurisdictional concerns.'' \21\
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    \20\ 16 U.S.C. 824d(a) (``All rates and charges made, demanded, 
or received by any public utility for or in connection with the 
transmission or sale of electric energy subject to the jurisdiction 
of the Commission, and all rules and regulations affecting or 
pertaining to such rates or charges shall be just and reasonable.'') 
(emphasis added).
    \21\ Dissent at P 5.
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    8. In EPSA, the Supreme Court articulated a two-part test for 
evaluating whether a Commission action is within its jurisdiction to 
regulate practices affecting wholesale rates. First, the activity being 
regulated must ``directly affect'' wholesale rates.\22\ Although the 
Court did not exhaustively define what it means to ``directly affect'' 
wholesale rates, it noted that the wholesale market rules established 
in Order No. 745 \23\ ``meet that standard with room to spare.'' \24\ 
As the Court explained, those rules address how demand response 
resources participate in the RTO/ISO markets, including the levels at 
which they bid and are compensated.\25\
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    \22\ EPSA, 136 S. Ct. at 774 (citing Cal. Indep. Sys. Operator 
Corp. v. FERC, 372 F.3d 395, 403 (2004)).
    \23\ Demand Response Compensation in Organized Wholesale Energy 
Markets, Order No. 745, 134 FERC ] 61,187, order on reh'g & 
clarification, Order No. 745-A, 137 FERC ] 61,215 (2011), reh'g 
denied, Order No. 745-B, 138 FERC ] 61,148 (2012).
    \24\ EPSA, 136 S. Ct. at 774.
    \25\ Id. at 774-75.
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    9. The wholesale market rules that incorporate a state-determined 
carbon price into RTO/ISO markets can satisfy that ``directly affect'' 
standard. Like the rules at issue in Order No. 745, the wholesale 
market rules that incorporate a state-determined carbon price could, 
depending on the particular circumstances, govern how resources 
participate in the RTO/ISO market, how market operators dispatch those 
resources, and how those resources are ultimately compensated.\26\ As 
such, those wholesale market rules can affect wholesale rates in 
essentially the same way described in EPSA.
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    \26\ See, e.g., Tr. 23:3-22 (D. Hill); 28:24-29:8, 52:24-53:13 
(Peskoe); D. Hill Comments at 5-7; Peskoe Pre-Conference Filing at 
2-3; Price Comments at 8-9; Rossi Pre-Conference Filing at 3. See 
generally Transmission Planning and Cost Allocation by Transmission 
Owning and Operating Public Utilities, Order No. 1000, 136 FERC ] 
61,051, at PP 203-224 (2011), order on reh'g, Order No. 1000-A, 139 
FERC ] 61,132, order on reh'g and clarification, Order No. 1000-B, 
141 FERC ] 61,044 (2012), aff'd sub nom. S.C. Pub. Serv. Auth. v. 
FERC, 762 F.3d 41 (D.C. Cir. 2014) (requiring that regional 
transmission planning processes consider transmission needs driven 
by public policy requirements (which can include state public 
policies)).
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    10. Second, EPSA explained that the Commission cannot regulate a 
matter that FPA section 201(b) reserves for exclusive state 
jurisdiction, ``no matter how direct, or dramatic, its impact on 
wholesale rates.'' \27\ The Court explained, however, that the effects 
that wholesale market rules have on retail rates or other matters 
subject to exclusive state jurisdiction do not, in and of themselves, 
cause the Commission to exceed its jurisdiction.\28\ Instead, those 
effects are the inevitable result of the fact that the FPA divides 
jurisdiction over the electricity sector between the Commission and the 
states.\29\ In turning to the specifics of Order No. 745, the Court 
concluded that the rule did not regulate retail rates because ``every 
aspect of [the rule] happens exclusively on the wholesale market and 
governs exclusively that market's rules'' and ``the Commission's 
justifications for regulating demand response are all about, and only 
about, improving the wholesale market.'' \30\ Under those 
circumstances, the Court explained, ``section 201(b) imposes no bar'' 
on Commission authority.\31\
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    \27\ EPSA, 136 S. Ct. at 775.
    \28\ Id. at 776 (``[A] FERC regulation does not run afoul of 
Sec.  824(b)'s proscription just because it affects--even 
substantially--the quantity or terms of retail sales.'').
    \29\ Id. (``It is a fact of economic life that the wholesale and 
retail markets in electricity, as in every other known product, are 
not hermetically sealed from each other. To the contrary, 
transactions that occur on the wholesale market have natural 
consequences at the retail level. And so too, of necessity, will 
FERC's regulation of those wholesale matters.'').
    \30\ Id.
    \31\ Id.
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    11. The wholesale market rules that incorporate a state-determined 
carbon price in RTO/ISO markets can satisfy this standard as well. 
Wholesale market rules that incorporate a state-determined carbon price 
into RTO/ISO markets would not regulate a matter reserved exclusively 
to the states under the FPA, or otherwise displace state authority, 
including state authority over

[[Page 66968]]

generation facilities.\32\ Instead, wholesale market rules that 
incorporate a state-determined carbon price in RTO/ISO markets can 
``govern exclusively'' the wholesale market and do so for the purpose 
of improving that market.\33\ If so, the wholesale market rules that 
incorporate a state-determined carbon price could affect matters within 
state jurisdiction, including a state's regulation of generation 
facilities, without running afoul of section 201(b)'s limitation on 
Commission jurisdiction.\34\ Under that arrangement, and as in the 
CAISO EIM example discussed above,\35\ the state would retain authority 
over that carbon price as well as other measures for regulating 
generation facilities. For these reasons, incorporating a state-
determined carbon price into RTO/ISO markets would not in any way 
diminish state authority.
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    \32\ See 16 U.S.C. 824(b).
    \33\ EPSA, 136 S. Ct. at 776.
    \34\ Id.
    \35\ See supra P 6.
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    12. Finally, we note that incorporating a state-determined carbon 
price into RTO/ISO markets could represent another example of the type 
of ``program of cooperative federalism'' that the Court noted with 
approval in EPSA.\36\ RTO/ISO market rules that incorporate a state-
determined carbon price could, as discussed above, improve the 
efficiency and transparency of the organized wholesale markets by 
providing a market-based method to incorporate state efforts to reduce 
GHG emissions. Because the decision about the carbon price would be 
determined by the state--which could select a price of zero, should it 
choose--state authority would be unaffected, further removing any doubt 
that rules that incorporate such a state-determined carbon price would 
comply FPA section 201(b).\37\
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    \36\ EPSA, 136 S. Ct. at 779-80.
    \37\ Id. at 780.
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2. Commission Encouragement of Efforts To Incorporate a State-
Determined Carbon Price Into RTO/ISO Markets

    13. As noted, on September 30, 2020, the Commission held a 
technical conference on the integration of state-determined carbon 
pricing in RTO/ISO markets. Participants at the conference identified a 
diverse range of potential benefits that could arise from such a 
proposal. Those benefits include the development of technology-neutral, 
transparent price signals within RTO/ISO markets and providing market 
certainty to support investment.\38\ In addition, participants 
explained that carbon pricing is an example of an efficient market-
based tool that incorporates state public policies into RTO/ISO 
markets, without in any way diminishing state authority.\39\
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    \38\ See Tr. 24:1-3 (D. Hill), 85:17-21 (Bowring), 95:14-16 
(Olson), 171:1-10 (White), 177:1-3 (Mukerji), 219:6-25 (Wadsworth), 
261:24-262:5 (``From a pure business perspective, clarity and 
certainty are so important. And for those of us that are involved in 
making these long-term capital-intensive investments in energy 
infrastructure, having this mechanism that can provide long-term 
price signals for investment would be hugely valuable.'') (Beane), 
264:17-19 (Crane), 278:8-10, 279:10-15 (Segal), 283:17-19 (Wiggins), 
300:20-301:12 (Beane), 312:22-313:15 (Beane), 314:14-22 (Crane), 
317:11-20 (Segal), 326:17-327:7 (Wiggins).
    \39\ See, e.g., Tr. 27:7-11, 29:9-24 (Peskoe), 31:15-32:12 
(Price), 85:9-21 (Bowring), 200:11-23 (Breidenich).
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    14. We agree that proposals to incorporate a state-determined 
carbon price in RTO/ISO markets could, if properly designed and 
implemented, significantly improve the efficiency of those markets.\40\ 
Accordingly, we propose to make it the policy of this Commission to 
encourage efforts by RTOs/ISOs and their stakeholders--including 
States, market participants, and consumers--to explore establishing 
wholesale market rules that incorporate state-determined carbon prices 
in RTO/ISO markets. Although we will review any specific FPA section 
205 filing based on the facts and circumstances presented in each 
proceeding, we encourage interested parties to explore approaches to 
propose wholesale market rules to incorporate a state-determined carbon 
price in RTO/ISO markets.
---------------------------------------------------------------------------

    \40\ See, e.g., Tr. 31:15-25 (Price), 99:16-22 (van Welie), 
150:6-23 (Mukerji), 169:5-12. (Hogan), 170:1-15 (Mukerji), 170:20-
171:10 (White), 175:5-20 (Rothleder), 219:1-221:4 (Wadsworth), 
265:4-21 (Crane), 271:1-5 (T. Hill), 282:15-22 (Tierney).
---------------------------------------------------------------------------

B. Considerations for Evaluating an FPA Section 205 Proposal To 
Incorporate a State-Determined Carbon Price in RTO/ISO Markets

    15. The Commission will review any FPA section 205 filing that 
proposes to establish wholesale market rules that incorporate a state-
determined carbon price in RTO/ISO markets based on the particular 
facts and circumstances presented in that proceeding. Nevertheless, 
certain questions and issues are likely to arise in any such filing. 
Below, we identify certain information and considerations that, based 
on the record at the Carbon Pricing Technical Conference, we believe 
may be germane to the Commission's evaluation of a section 205 filing 
to determine whether an RTO/ISO's market rules that incorporate a 
state-determined carbon price in RTO/ISO markets are just, reasonable 
and not unduly discriminatory or preferential. The Commission seeks 
comment on whether these are the appropriate information and 
considerations the Commission should take into account or whether 
different or additional considerations may be or must be taken into 
account.

    a. How, if at all, do the relevant market design considerations 
change depending on the manner in which the state or states 
determine the carbon price (e.g., price-based or quantity-based 
methods)? How will that price be updated?
    b. How does the FPA section 205 proposal ensure price 
transparency and enhance price formation?
    c. How will the carbon price or prices be reflected in LMP?
    d. How will the incorporation of the state-determined carbon 
price into the RTO/ISO market affect dispatch? Will the state-
determined carbon price affect how the RTO/ISO co-optimizes energy 
and ancillary services? Are any reforms to the co-optimization rules 
necessary in light of the state-determined carbon price?
    e. Does the proposal result in economic or environmental 
leakage? \41\ How does the proposal address any such leakage?
---------------------------------------------------------------------------

    \41\ See Hogan Comments at 4, Wolak Comments at 2, Singh 
Comments at 2-3. See also Tr. 56:12-57:10 (Price) (generally 
discussing economic and environmental leakage), Tr. 46:2-18 (Peskoe) 
(discussing the Commission's jurisdiction over proposals from public 
utilities to address leakage).
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III. Comment Procedures

    16. The Commission invites comments on this Proposed Policy 
Statement by November 16, 2020 and reply comments by December 1, 2020. 
Comments must refer to Docket No. AD20-14-000, and must include the 
commenter's name, the organization they represent, if applicable, and 
their address in their comments.
    17. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's website at https://www.ferc.gov. The Commission accepts most standard word processing 
formats. Documents created electronically using word processing 
software should be filed in native applications or print-to-PDF format 
and not in a scanned format. Commenters filing electronically do not 
need to make a paper filing.
    18. Commenters that are not able to file comments electronically 
must send an original of their comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE, 
Washington, DC 20426.
    19. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

[[Page 66969]]

IV. Document Availability

    20. User assistance is available for eLibrary and the Commission's 
website during normal business hours from the Commission's Online 
Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
[email protected].
    21. The Commission provides all interested persons an opportunity 
to view and/or print the contents of this document via the internet 
through the Commission's Home Page (https://www.ferc.gov). At this time, 
the Commission has suspended access to the Commission's Public 
Reference Room, due to the proclamation declaring a National Emergency 
concerning the Novel Coronavirus Disease (COVID-19), issued by the 
President on March 13, 2020.
    22. From the Commission's Home Page on the internet, this 
information is available on eLibrary. The full text of this document is 
available on eLibrary in PDF and Microsoft Word format for viewing, 
printing, and/or downloading. To access this document in eLibrary, type 
the docket number excluding the last three digits of this document in 
the docket number field.
    23. User assistance is available for eLibrary and the Commission's 
website during normal business hours from the Commission's Online 
Support at (202) 502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
[email protected].
    By direction of the Commission. Commissioner Danly is concurring in 
part and dissenting in part with a separate statement attached.

    Issued: October 15, 2020.
Kimberly D. Bose,
Secretary.

United States of America

Federal Energy Regulatory Commission

Carbon Pricing in Organized Wholesale Electricity Markets

Docket No. AD20-14-000

    DANLY, Commissioner, concurring in part and dissenting in part:
    1. The Commission issues a proposed policy statement today in this 
docket to ``encourage'' Regional Transmission Organizations (RTOs) and 
Independent System Operators (ISOs) to develop potential Federal Power 
Act section 205 \1\ filings proposing market rules to accommodate 
state-determined carbon pricing programs.\2\ I dissent in part because 
I believe that the issuance of a policy statement on this subject--a 
wholly discretionary act--is unnecessary and unwise. I concur with that 
part of the policy statement noting that we have jurisdiction to 
entertain section 205 filings that seek to accommodate state carbon-
pricing policies, which is a fundamental principle that cannot be 
doubted.
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    \1\ 16 U.S.C. 824d (2018).
    \2\ Carbon Pricing in Organized Wholesale Elec. Mkts., 172 FERC 
] 61,062 (2020).
---------------------------------------------------------------------------

    2. As to my concern that the Commission should not exercise its 
discretion to issue a policy statement, I expressed similar concerns in 
my recent dissent to Order No. 2222 requiring RTOs/ISOs to promulgate 
rules to accommodate distributed energy resource aggregators.\3\ There 
I questioned the Commission's seizure of authority at the expense of 
the States and advocated that ``[w]e should allow the RTOs and ISOs . . 
. to develop their own DER programs in the first instance.'' \4\ 
``[T]hen the question of the Commission's jurisdiction will be ripe.'' 
\5\
---------------------------------------------------------------------------

    \3\ See Participation of Distributed Energy Res. Aggregations in 
Mkts. Operated by Reg'l Transmission Orgs. & Indep. Sys. Operators, 
172 FERC ] 61,247 (2020) (Danly, Comm'r, dissenting).
    \4\ Id. (Danly, Comm'r, dissenting at P 4).
    \5\ Id.
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    3. This policy statement does not mandate that RTOs/ISOs adopt 
carbon-pricing accommodation regimes. I agree that the Commission 
should not issue such a mandate.
    4. Instead, the policy statement ``encourages'' RTO/ISO rule 
changes. Without seeing a proposal, the Commission predetermines that 
any such proposal will be within the Commission's jurisdiction and 
``would not in any way diminish state authority.'' \6\ That may well 
turn out to be true, but I would have waited until we had an actual 205 
filing before us rather than pre-judging the issue based on unstated 
assumptions about how such programs might work. It is easy to imagine 
any number of RTO/ISO carbon-pricing proposals that would violate the 
Federal Power Act by impermissibly invading the authorities reserved to 
the States. This policy statement is not, as the majority's order 
characterizes it ``another example of the type of `program of 
cooperative federalism' that the Court noted with approval in EPSA.'' 
\7\ There is no program. This is instead a non-binding, blanket 
dismissal of potential jurisdictional concerns.
---------------------------------------------------------------------------

    \6\ Carbon Pricing in Organized Wholesale Elec. Mkts., 172 FERC 
] 61,062 at P 12.
    \7\ Id. P 13 (quoting FERC v. Elec. Power Supply Ass'n, 136 S. 
Ct. 760, 779-80 (2016)).
---------------------------------------------------------------------------

    5. As to the substance of the policy statement, I concur. I cannot 
do otherwise. The policy statement amounts to little more than a 
statement of fact: Section 205 of the Federal Power Act has not been 
repealed and the Commission therefore has jurisdiction to entertain 
section 205 filings that seek to accommodate state carbon-pricing 
policies. Surely, that need not be stated. And to the extent the 
Commission feels the need to ``clarify'' the fact that we have the 
power to accept just and reasonable tariff revisions that are designed 
to include mandatory state charges in energy and capacity market 
offers, I am hard-pressed to identify a more settled area of Commission 
law.
    For these reasons, I respectfully concur in part and dissent in 
part.

James P. Danly,

Commissioner.

[FR Doc. 2020-23296 Filed 10-20-20; 8:45 am]
BILLING CODE 6717-01-P

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